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Franchising can be a great way for a growing business to increase profits and income streams. But not every small business is well-suited for this type of expansion.

Becoming a successful franchisor involves a variety of complex legal and financial considerations and a strong business plan. Before you consider launching a franchise, ask yourself the following three questions to determine if your business is a good fit.

Is Your Business Successful Enough for Franchising?

In most cases, your business must be profitable before you begin the franchising process. Sometimes, however, we find exceptions to that rule.

Investors who may be interested in becoming your franchisees seek innovative, successful concepts, but they also can recognize potential. Many franchisees prefer to buy into a thriving business, but if your concept is dynamic and well thought out, it can resonate with entrepreneurs looking for the “next big thing.”

If business is booming, you can generate a lot of excitement, even if your concept is fairly new. In today’s economy, savvy investors understand that success often means being on the cutting edge of a new concept.

Can Your Business be Replicated Through Franchising?

If you have a proven, profitable business, franchising can be extremely lucrative, as long as you ensure your concept will work equally well for others.

Franchising works well if your business model is one that can be replicated in other locations. If yours is a business that requires professional qualifications or high skill levels, you may have to include specialized training and support for franchisees.

The bottom line is this: Can someone else take your concept and put it to work in another market? Do you have a business that can be successful elsewhere? If so, franchising may be a good expansion strategy.

If not, now’s the time to start honing your concept and business model to make it easy — and profitable — for others to replicate.

Do You Have the Time and Money to Invest in Franchising?

Your business may be ready for a franchise, but are you ready?

Franchising creates a separate business, apart from the business you are seeking to franchise. This new business will require time, effort and some level of investment on your part. But, depending on how you structure your franchise agreement, the franchisees will likely be responsible for scouting locations, securing financing, and hiring and training staff, and your commitment to the process will level off.

After creating all your required franchise documents, you may find that your main challenge will be to find the right franchisees, those who fit your brand and who will uphold the standards of your concept. This may change over time, but it is important to have a concept of your ideal franchisee from the beginning.

Franchising is typically less expensive than opening multiple company-owned locations. It also poses less risk and more opportunities for profitability. But becoming a franchisor is not without difficulties and risks, and will require some level of investment on your part.

To achieve success as a franchisor, you will need to work closely with an experienced franchise attorney. Creating the right legal framework for launching your franchise will protect your interests, reduce potential disputes with franchisees and ensure your continued success.

The Franchise & Business Law Group, serving the greater Salt Lake City area, is Utah’s premier legal specialist in business and franchise law. Contact us today to schedule a consultation to discuss your business concept, and discover your potential for expanding your company through the franchising process.

If you research franchising or franchise law online, you’re likely to discover conflicting ideas and advice. Like many areas of business law, misunderstandings and misconceptions about the franchise process are common. This is true for the franchisor as well as the franchisee.

Below, we debunk three of the most common franchising myths that apply to franchisees.

Franchising Myth #1: Franchise Agreements are Non-Negotiable

It is a commonly held belief that franchise agreements cannot be negotiated.

You may have read or heard that franchisors use the same contract or agreement for all franchisees, for the purpose of standardization or to keep the playing field even for everyone. Consistency is important in franchising, and the legal agreement protects the brand.

In truth, franchising agreements, like most issues related to business law, are often negotiable.

Of course, franchisors may be reluctant to discuss changes to a franchise agreement, especially early in the negotiation process. Also, many parts of the franchising contract will not be open to negotiation, such as those that address the description and rules of the business systems.

A skilled franchise attorney will understand the restrictions and know how to propose strategic modifications that could limit your liability and protect your rights.

Franchising Myth #2: Marketing is for Franchisors

Who pays for the advertising for a franchise business?

Many people mistakenly believe that marketing the franchise business is the responsibility of the franchisor. While many franchisors do engage in regional or national advertising campaigns — and most franchising contracts specify required ongoing payments for the purpose of marketing — these efforts are generally geared to benefit the brand as a whole, and not a single franchisee.

As a result, all franchisees may not benefit equally.

For this reason, franchise owners are usually required to engage in local business marketing and promotion. Most franchisees are obligated to spend a pre-established sum on advertising each month, and to use marketing strategies and tactics that help bring in new customers.

Franchising Myth #3: You Can Sell or Quit Your Franchise As You Wish

Your franchise agreement is a legal and binding contract. The term (typically 5-20+ years) is the time you are obligated to keep your franchise business in operation and running. Exiting a franchising contract is a bit different from selling or quitting a stand-alone, independent business, and it may be more difficult than you think and if you close or stop operating without approval, it could cost you.

Most franchise contracts have conditions that must be satisfied prior to exiting the business.

The franchisor may have the right of first refusal, meaning that they must be granted the opportunity to purchase the franchise prior to it being offering to others. In addition, selling your business may involve the payment of hefty franchise transfer fees. You also may be required to pay for the training of new owners.

Exiting your franchise agreement without following the conditions may be considered a breach of contract, and your franchisor may be entitled to monetary damages, including the payment of ongoing royalties through the end of the term of the franchise agreement. If you are set on selling or quitting your franchise, however, an experienced franchise attorney may be able to help negotiate an early exit from your contract.

The professional attorneys of the Franchise & Business Law Group, located in Provo, Utah, are Northern Utah’s franchise and business law experts. Contact our office today to schedule your consultation to discuss your questions and learn more about the advantages of franchising.